Chile: An Innovative Incubator

Salmon aren't native to Chile. So how did this shoestring of a country best known for its immense copper reserves become the world's second-largest producer of the rosy-fleshed fish? Much of the credit goes to a Santiago business incubator called Fundación Chile. In the 1980s the nonprofit foundation concluded that Chile had natural competitive advantages that could make it a big success in commercial salmon farming. Abundant freshwater lakes and saltwater fjords along the country's 6,435-kilometer Pacific coast don't freeze during the winter, which means the salmon grow faster, reaching market weight at least six months earlier than they do in Norway, the world's other big producer. By 1982, Fundación Chile had its first salmon farm up and running. Seven years later it sold it to a Japanese company for $22 million.

That early success spurred the creation of an industry that directly employs 45,000 people, from assembly-line fish-packers to PhD marine biologists. Chile exported $1.4 billion of salmon and trout last year, 35% of the world's supply. At first, companies exported whole gutted fish and frozen fillets. But businesses like Salmones MultiExport Ltd. have gone on to develop value-added products such as smoked salmon and prepackaged sushi for the discerning Japanese market. Such products now account for 65% of Chile's salmon exports. ``We still see enormous potential for growth of specialty salmon,'' says Ricardo Grunwald, sales director at Salmones MultiExport, a Chilean-owned outfit with $120 million in sales that counts Wal-Mart Stores Inc. (WMT ) and U.S. supermarket chain Safeway Inc. (SWY ) among its customers.

Fundación Chile was set up in 1976, just three years after a military coup deposed President Salvador Allende. Eager to tap foreign expertise to rebuild Chile's battered economy, the regime of General Augusto Pinochet persuaded ITT Corp. to use part of the $100 million settlement the American company received in compensation for the 1971 expropriation of Chile's national telephone company to set up an incubator for private sector startups.

Three decades later, Fundación Chile boasts an impressive track record. The outfit has helped boost exports of berries and other fresh fruits to $2 billion last year via biotech research and the development of quality-certification programs. It has worked with the forestry industry to diversify into furniture and paper products. The foundation's scientists have also developed a recombinant DNA vaccine against a common ailment that can kill salmon.

Now, in response to companies' clamor for better-skilled workers, the foundation is working with a number of industries to develop training programs. Such planning is crucial if Chile is to attain its goal of replicating the gains of economies like Finland, which went from exporting unprocessed logs to sophisticated paper products to cell-phone technology. ``The idea is to figure out how Chile, which largely depends on natural resources, can take the same path toward greater use of technology,'' says Eduardo Bitran, the economist who heads Fundación Chile.

While Chile searches for its future, innovation is still crucial to the continued success of its aquaculture industry. Just ask Gustavo Parada, a biochemist who directs the foundation's marine-resources research station in Quillaipe, in southern Chile. After stepping into a disinfectant foot bath, he enters a large, sterile room with lights dimmed to mimic deep ocean water. He leans over a large 12,000-liter tank holding thousands of tiny squiggling fish. ``Chilean austral hake,'' he says, grinning like a proud father. ``That could be Chile's next 'salmon.'''

White-fleshed hake is such a popular fish that its ocean stocks are dwindling. Over the past four years, Parada's team of nine scientists has mastered the difficult art of breeding the fish in captivity, carefully determining the proper nutrient mix, oxygen supply, and water temperature. Early next year the team will place some of their hatchlings in ocean cages to determine how quickly the fish will be ready for commercial farming. ``This has the potential to be much, much bigger than salmon,'' says Parada. If that's true, Chile will again show that even small countries at the world's end can affect a global market.

By Geri Smith in Quillaipe, Chile

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